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We all have a role to play in saving our planet, and as investors, that role is super simple: Embrace ESG investing.
What on Earth does that mean?
ESG stands for environmental, social and corporate governance, and ESG stocks broadly represent investments in companies that are doing good by those three factors.
These companies are promoting the adoption of clean energy to reduce our carbon footprint. They are driving us forward on a path toward ubiquitous electric vehicle adoption. They are bringing us into a new era of plant-based foods where we do not subject animals to harsh living conditions.
All in all, these are the companies which are helping us create a brighter future for ourselves, our children and their children.
They are good companies.
And they also happen to be great investment opportunities. ESG investing will outperform in a huge way over the next decade for two big reasons:
- Rising investor interest. The percentage of institutional and retail investors who considered ESG impacts in their investment decisions rose from 48% in 2017 to 75% in 2019, while ESG funds saw record inflows in 2019. The more investors buy ESG stocks, the higher those stocks will go.
- Shifting consumer demand. Millennial and Gen Z consumers will substantially increase their purchasing power in the 2020s, and these consumers are aligning their purchasing decisions with socially and environmentally positive products and services. The more young consumers buy ESG-positive products and services, the higher profits at ESG companies will go.
To that end, ESG investing is both the socially responsible thing and the profitable thing to do today.
With that in mind, here is a list of my favorite 10 ESG stocks to buy for a brighter future:
- Tesla (NASDAQ:TSLA)
- Beyond Meat (NASDAQ:BYND)
- Nio (NYSE:NIO)
- NextEra Energy (NYSE:NEE)
- Workhorse (NASDAQ:WKHS)
- First Solar (NASDAQ:FSLR)
- Else Nutrition (OTCMKTS:BABYF)
- Forum Merger II Corporation (NASDAQ:FMCI)
- Gores Metropoulos (NASDAQ:GMHI)
- Amazon (NASDAQ:AMZN)
ESG Investing Picks: Tesla (TSLA)
The first stock on this list is also the most well-known.
Often considered the “poster boy” for the ESG investing megatrend, Tesla is pioneering a much more sustainable world built on the back of electric vehicles and solar energy.
Demand for both electric cars and solar panels will soar over the next decade. By 2030, most passenger cars on the road will be electric and most homes in developed nations will be powered by solar.
Tesla has a compelling opportunity to lean into its technology, branding, first-mover, distribution and production advantages to emerge as a leader in both EVs and solar energy. If the company does, the sky really is the limit for how high TSLA stock can go.
Beyond Meat (BYND)
The second stock on this list is the second most well-known.
Much like Tesla is pioneering the way for a world of gas-free cars, Beyond Meat is pioneering a future of animal-free meat.
Over the years, consumers globally have developed huge demand for meat. This demand surge has prompted a meat supply surge, which has led to a rapid increase in the number of cows in the world.
That seems all fine and dandy until you realize that your average cow releases between 70 and 120 kilograms of methane per year. There are over 1.5 billion cows and bulls in the world. Add it all up, and the unnatural surge in animal-based meat supply is a huge contributor to global warming.
Not to mention, maintenance of this farm land is responsible for 2.8 billion metrics tons of carbon dioxide (CO2) emissions every year.
The fix? Beyond Meat’s plant-based meat, which tastes just as good as animal-based meat and requires no cows. Just plants and a cool scientific process.
Demand for these plant-based meat products is soaring today, and will continue to soar over the next several years as environmentally friendly consumers continue to opt for environmentally friendly plant-based meat over animal-based meat.
As that happens, Beyond Meat will fundamentally alter the $1.4 trillion global meat landscape. In the process, it will turn into a hugely valuable company. This, of course, means BYND stock will soar.
ESG Investing Picks: Nio (NIO)
Often considered the Tesla of China, Nio is another way to get into ESG investing.
Nio is doing in China today exactly what Tesla was doing in the U.S. a few years back.
Create a few premium electric vehicles with superior performance and strong demand. Cultivate exceptionally strong brand equity and customer loyalty around the Nio name. Sell those cars like crazy to rich folks.
Because the premium goods market in China is very strong, Nio has a compelling opportunity to turn into a dominant player in China’s booming premium EV market over the next several years.
As the company does that, revenues, profits and the NIO stock price will all soar.
NextEra Energy (NEE)
Leading renewable energy and battery storage company NextEra Energy is another strong stock to buy to play the ESG investment theme of the 2020s.
In a nutshell, the renewable energy space is positioned for huge growth over the next decade. Demand for renewable energy will grow exponentially, because: 1) consumers will increasingly want to shift toward clean energy as they become more aware of ESG impacts, 2) governments globally will help support that growing demand with subsidies, 3) the costs of renewable energy will come down with scale and 4) the efficiency of renewables will go up with technological improvements.
At the same time, supply will adjust to shifting demand, and companies will pour more and more money into clean energy projects.
That is great news for NextEra Energy, which is widely considered America’s leading clean energy company. It has a huge footprint in solar and wind power, as well as battery storage. This leading position in a secular growth market is why NextEra’s stock price is up a whopping 180% over the past five years.
It’s also why the stock will stay hot for the next decade. Demand for renewable energy will grow exponentially in the 2020s. As it does, renewable energy companies like NextEra will see their revenues, profits and stock prices all move way higher.
ESG Investing Picks: Workhorse (WKHS)
According to a report from the World Economic Forum, delivery trucks pump about 19 million tons of CO2 emissions every year. Given the surge in e-commerce and delivery demand, that number is projected to rise by 32% over the next decade.
But only if nothing changes.
Electric delivery trucks are looking to rewrite that future. The company that is pioneering this potential planet-saving change is Workhorse.
Workhorse has developed a series of market-leading electric delivery trucks that are 100% clean, hyper-efficient, cost-effective, powerful and multi-purpose. These trucks have scored a big deal with the United Parcel Service (NYSE:UPS), and appear to be on the cusp of scoring another big deal with the U.S. Postal Service. Plus, these trucks also have advanced drone delivery technology.
All in all, Workhorse is a pure play on the EV disruption in the last-mile delivery market. And as such, WKHS stock is an ESG investing opportunity with compelling long-term upside.
First Solar (FSLR)
The stars have finally aligned for the solar energy megatrend to come to life, and over the next decade, solar power will become globally ubiquitous, powering everything from your home to your office. You can thank:
- Government support. Almost every country in the world has a “100% clean energy” target for 2030, 2040 or 2050.
- Falling costs. Solar energy costs have dropped 70% over the past 10 years to reach near grid parity.
- Improving technology. Nearly 26% of solar systems will be paired with energy storage capability by 2025, versus just 4% in 2019.
- Rising consumer demand. Roughly 46% of U.S. homeowners are seriously thinking about adding solar panels to their homes, up from 40% in 2016.
All of this means that some of the best ESG investing opportunities for the next decade are solar stocks. In that solar industry, the top pick is probably First Solar — one of the largest and most qualified solar energy companies.
Over the next decade, as solar energy installs grow exponentially and solar becomes the largest energy source in the world, First Solar’s volumes, revenues and profits will soar. Of course, this will lead to a soaring FSLR stock price, too.
ESG Investing Picks: Else Nutrition (BABYF)
Else Nutrition is one of the most interesting ESG stocks to buy for the next decade because it is an explosive, micro-cap pure-play on plant-based food adoption in the highly specialized infant nutrition vertical.
The story here is pretty simple.
The whole world is pivoting from animal-based foods to plant-based foods. Infant nutrition has lagged in this transition. But Else Nutrition has finally brought to market the first plant-based milk formula for toddlers, based on a novel mix of almonds, buckwheat and tapioca.
This first-of-its-kind formula — which will be accompanied by a newborn milk formula in the coming months — has a unique opportunity to leverage first-mover advantage. Else Nutrition can disrupt the highly specialized, always-necessary $80 billion infant nutrition market.
If management successfully executes against this opportunity, this tiny food company could turn into a multibillion-dollar giant.
Forum Merger II Corporation (FMCI)
Another small-cap ESG stock to buy to play the plant-based food megatrend is Forum Merger II Corporation. This is just a SPAC that is set to acquire Tattooed Chef.
Tattooed Chef specializes in making pre-prepared, plant-based frozen foods that are GMO-free, organic and protein-rich. Its best-selling products include organic acai bowls, cauliflower pizza, Mexican street corn, cauliflower stir-fry and zucchini spirals.
The company’s product portfolio is basically the dream freezer of your typical health-conscious, eco-sensitive, time-constrained millennial and Gen Z consumer — a person who is already eating plant-based foods once a month. They are increasing their intake of plant-based proteins and rapidly pivoting to pre-prepped frozen foods to save time.
To that extent, adoption of these products has soared over the past few years. In 2019, the company’s sales rose 77%. And they will continue to soar over the next few years as plant-based foods only become more and more ubiquitous.
Against the backdrop of this supercharged growth, FMCI stock will keep flying higher.
ESG Investing Picks: Gores Metropoulos (GMHI)
Car accidents are a big problem.
Every day, more than more than 90 people die in car accidents, and a big portion of those accidents are due to distracted driving. While we will never eliminate all accidents, we can significantly reduce the number of distracted driving accidents by enabling a new era of advanced, partially autonomous cars.
The key to unlocking this new era of semi-autonomous cars is LiDAR — or advanced laser sensors that help a car dynamically recognize and respond to objects around it.
Luminar Technologies — which is set to go public via Gores Metropoulos — is the best LiDAR company in the world, having built the only viable independent long-range LiDAR sensors that are set to start appearing in Volvo (OTCMKTS:VLVLY) cars in 2022.
Those Volvo cars represent just the beginning of what will be a decade long growth ramp for Luminar, wherein the company’s leading LiDAR sensors will be deployed on millions of vehicles every year and help save dozens of lives every day.
In this sense, GMHI stock is a winning investment, both in terms of money and lives.
Last, but certainly not least, on this list of ESG stocks to buy is Amazon.
Amazon’s enormous cross-industry presence means the company is a huge contributor to CO2 emissions. Think of all the deliveries Amazon has to fulfill every day. Or all the energy that Amazon Web Services uses every day to power over 30% of the world’s public cloud computing capacity.
Fortunately, Amazon knows this, and is committed to reducing its CO2 footprint. By the end of the decade, I think it is very likely that all of Amazon’s delivery trucks are electric, and that all AWS servers are powered by clean energy.
In embarking on this disruptive transition, Amazon will dramatically advance the ESG movement while still sustaining huge growth in its core businesses.
And, for that reason, AMZN stock is a winning investment — both from a “making money” perspective and a “saving the planet” perspective.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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